The National Housing Trust Fund: Making Sure it Meets the Greatest Needs

By Andrew Aurand, NLIHC Vice President for Research and Dan Emmanuel, NLIHC Research Analyst

The National Low Income Housing Coalition’s most recent Gap report indicates a national shortage of more than seven million affordable homes available to extremely low income (ELI) renter households, those with income of no more than 30% of their area median income (AMI). Unable to find affordable housing, ELI renters account for 7.8 million or 68% of the nation’s 11.4 million renter households who spend more than half of their income on housing. Meanwhile, fewer than half of new rental homes supported by federal housing subsidies on which developers most often rely – including the Low Income Housing Tax Credit (LIHTC), HOME Investment Partnerships Program (HOME), and the Federal Home Loan Bank’s Affordable Housing Program (AHP) – reach these households.

This year marks the first distribution of money from the national Housing Trust Fund (HTF), a program created to focus specifically on the housing needs of the lowest income renters. Funded by mandated contributions from Fannie Mae and Freddie Mac, at least 90% of HTF funds must be used for rental housing and at least 75% of funds for rental housing must benefit ELI households. All HTF money must benefit ELI households while the HTF is capitalized under $1 billion a year. The first year’s distribution of $174 million is small in comparison to the need, but is an important step forward in helping the nation’s lowest income renters find affordable housing. Successful implementation of the program in its first year will ensure in the future that the HTF truly serves the population it was intended to serve to the greatest extent possible.

A potential challenge that state advocates and other stakeholders are working to address is the possibility that renters whose income is at 30% of AMI may be cost burdened, spending more than 30% of their income on housing, even if they live in an HTF supported rental home. The Housing and Economic Recovery Act of 2008 modified the definition of ELI for the national HTF to include households whose income is no greater than the federal poverty guideline or 30% of AMI, whichever is higher.[1] The change broadened eligibility for the HTF to households who live in poverty, but whose income is greater than 30% of AMI. HUD’s HTF interim rule went a step further and applied the same criteria to set maximum rents at 30% of either the federal poverty guideline or 30% of AMI, whichever is higher. Wherever the federal poverty guideline is higher, renters with household income at 30% of AMI will be cost burdened by the maximum rent.

Table 1 shows the HTF maximum rent standard by apartment size across metropolitan and non-metropolitan counties.[2] Maximum rents are set at 30% of the federal poverty guideline in 61% and 92% of counties for one-bedroom and two-bedroom apartments, respectively. The vast majority of metropolitan and non-metropolitan counties alike have maximum rents based on the federal poverty guideline for apartments larger than one bedroom.

Table 1: Distribution of HTF Maximum Rent Standards by County and Size

All U.S. Countiesa(3,147)>

Metropolitan Counties (1,198)

Non-Metropolitan Counties (1,976)

Size

% of Counties with Max. Rents Set at 30% of Area Median Incomeb

% of Counties with Max. Rents Set at 30% of the Federal Poverty Guideline

% of Counties with Max. Rents Set at 30% of Area Median Income*

% of Counties with Max. Rents Set at 30% of the Federal Poverty Guideline

% of Counties with Max. Rents Set at 30% of Area Median Income*

% of Counties with Max. Rents Set at 30% of the Federal Poverty Guideline

0 Bedroom

62.57

37.43

80.30

19.70

51.82

48.18

1 Bedroom

38.82

61.18

59.85

40.15

26.06

73.94

2 Bedroom

8.48

91.52

18.61

81.39

2.33

97.67

3 Bedroom

4.13

95.87

9.85

90.15

0.66

99.34

4 Bedroom

1.76

98.24

4.26

95.74

0.25

99.75

a. Includes county portions in New England, where multiple maximum rents can exist within the same county.

b. Includes counties where rents at 30% of 30% of AMI or 30% of federal poverty guideline are equal.

To illustrate the challenge, we calculated the potential cost burden for a 3-person family with income at 30% of AMI in each county at the maximum HTF rent for a two-bedroom apartment. They are available at http://nlihc.org/sites/default/files/State-Tables_081516.xlsx. In the median county where the maximum rent is based on the federal poverty guideline, a family of this size and income could spend 38.3% of their income on rent. In the worst cases, it would be 52.1%. The poorest counties, where the federal poverty guideline is much higher than 30% of AMI, will have the highest potential cost burdens. Cost burdened households have difficulty affording other basic necessities such as food, transportation, and health care and are at greater risk of housing instability if they experience a sudden financial crisis.

Table 2 presents a sample budget for a 3-person family with income at 30% of AMI in Orange County, FL. A two-bedroom apartment priced at the maximum HTF rent, based on the federal poverty guideline, would take 38.3% of the family’s income. Even after receiving the maximum benefit from the Supplemental Nutrition Assistance Program (SNAP), the family would be unable to meet all of their expenses without additional assistance.

Table 2: Sample Monthly Budgets for Family of 3 in Orange County, FL

Monthly Income

Maximum SNAP Benefit for Family of 3

HTF Maximum Rent for 2BR Unit

Cost of Food on USDA Thrifty Plan*

Cost of Transportation**

Cost of Health Care ***

Income Remaining for All Other Expenses

3 Person Household at 30% AMI

$1,317

$511

$504

$462

$480

$486

-$104

*Based on USDA Thrifty Food Plan estimates in May 2016 for a single female head of household between the ages of 19-50 with two children aged 6-8.

The national HTF is an important new resource in addressing the housing needs of the nation’s poorest renters. While rents affordable to households at 30%, 20%, or even 15% of AMI are challenging to achieve given development and operating costs, developers and stakeholders across the country are finding creative ways achieve them. NLIHC organized a webinar that recently attracted almost 1,000 registrants to discuss how to finance and operate ELI housing. We encourage advocates to use these and other tools to continue pressing to reward rents targeted to the lowest income households in their states HTF allocation plans. In these ways, we can assure that the national HTF meets the needs of the lowest income renters.

[1] This definition for ELI was applied to other HUD programs in the Consolidated Appropriations Act of 2014.

[2] Includes county portions in New England, where multiple maximum rents can exist within the same county.